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EcoLog provides informed analysis of emerging financing
and technology trends in the clean technology ecosphere
culled from research and interviews with leading research
labs, technologists and investors.

Wood Pellets: The Next Oil Wars?
by EcoLog on Tue 25 Apr 2006 05:12 PM PDT |
The hottest topic in Europe is not $75 oil but wood pellets. Residential
boilers to large co-fired coal plants are consuming the renewable resource
so fast that exports can hardly keep pace. It is good news for countries
like Canada, Russia and the Baltic States who are becoming major
suppliers of wood pellets to the greening European economy
For investors bullish on biomass, consider placing a few wood pellet
processors in your portfolio alongside ethanol plants. The supply demand
picture is going to get even tighter.
Canada with its vast forestry resources is shipping upwards of 500,000
tons of wood pellets to Europe, new wood pellet processing plants are
coming online across Europe and markets from Thailand to South Africa
are shopping wood pellets. However, demand for wood pellets is just
starting to be stoked.
The Forestry Products Association of Canada says that once Canadian
companies become more focused on meeting CO2 reduction targets it will
need to keep the bulk of its shipments of carbon neutral wood pellets at
home. In the US, wood pellet demand has taken off over the last year. New
England states are now negotiating with Canadian wood pellet suppliers in
an effort to divert some of the European supply their way. And many
European markets are just starting to use wood pellets as a fuel.
Consumption in the UK and Netherlands has gone from 0 to 1 million tons
in two years.
What’s more this industry is ripe for consolidation. In regions as diverse as
Northwest Russia and Canada, the industry is comprised of 10 to 20 firms
producing 25,000 to 50,000 tons of wood pellets each. Companies like
Canadian forestry giant Canfor are buying up saw mills as the economic
value of the residual waste rises with the demand and price for wood
pellets.
One downside is that North Americans do not like to get their hands dirty,
says John Swaan, head of the Canadian Wood Pellet Association. Swaan
is frustrated by the slow uptake in North America, especially British
Columbia where the majority of wood pellet makers reside. Pacific
Bioenergy Corporation, Swaan’s company, sells 96% of its wood pellets to
Europe. Is the Federal government protecting the fossil fuel industry?
Carbon neutral wood pellets are, in fact, a very clean fuel; one bag of
pellets can stoke the wood stove for a week, and the residual ashes are a
good source of organic fertilizer for the garden.
For more on the European wood pellet and international biotrade markets,
see my article in Energy Risk in May.